Edited version of private advice

Authorisation Number: 1051895988414

Date of advice: 13 December 2021

Ruling

Subject: Deductions - rental property

Question

Are you entitled to a deduction for Underpinning and bathroom repairs carried out at your rental property?

Answer

Yes. Your expenses meet the requirements in Taxation Ruling TR 97/23 and are deductible. Further information about repairs can be found by searching 'QC 55249' on ato.gov.au

This ruling applies for the following period:

Year ended 30 June 20XX

The scheme commences on:

1 July 20XX

Relevant facts and circumstances

In late 20XX you purchased land located in Suburb XX, State of XX (the Land).

Sometime ago you purchased land.

A Builder was contracted to build multiple dwellings on the land.

Shortly after construction was finalised you moved into the dwelling on the land (the Property).

You no longer live in the Property as your main residence and rent the Property out.

Approximately XX years later you became aware of the dropping of a part of the building. This caused the bathrooms in the Property to leak.

The two bathrooms in the Property leaked frequently.

The tenant was unhappy that the leaking from the first floor was leaking over the family room and kitchen located on the ground floor.

You tried to fix the leaks with silicon, but the cracks expanded to a degree that silicon could not fix the problem and after a short period of time the leaks returned.

The tenant was unhappy with the situation and vacated the Property at the end of the lease.

You were advised that the waterproofing membranes have failed, and any new membrane will also fail in a few months because the footings are subsiding, and they need to be lifted and stabilised (Underpinning).

You needed to repair and stabilise the footings first and then repair the waterproofing membranes in both bathrooms.

You contacted your insurance company, who denied payment because waterproofing membrane and underpinning are not covered in any insurance policy.

You received three quotes for the underpinning works and chose the new methodology that is injecting foam (polyurethane) under the footings and lifting them to the correct the level.

The underpinning works were completed and paid for.

You then hired a contractor to repair the waterproofing membrane and bathrooms which included the following:

•         remove all tiles;

•         remove the shower screens;

•         remove all waterproofing membrane and cement sheets;

•         strengthening of timber structure to ensure no further movement occurs;

•         replace new cement sheets;

•         new waterproofing membrane;

•         new tiles; and

•         new shower screens (The framed shower screens were rusted and had to be changed. The new shower screens are semi-frameless).

The bathroom repairs were completed and paid for.

Approximately X months after the Property became vacant - the Property was rented out on a one-year term.

Only the shower areas of both bathrooms including waterproofing membranes, tiles in shower area and shower screens were repaired and replaced.

You did not replace any other items or parts of the other areas in the bathrooms.

Relevant legislative provisions

Income Tax Assessment Act 1997 section 25-10